In Washington DC, Treasury Secretary Scott Bessant buffs his nail on his shirt as he intervenes in support of the Japanese yen. Well, Japan is the leading foreign creditor of Washington’s borrowing. It holds $1.2 trillion in U.S. Treasury securities, and a country like ours, the world’s largest debtor, depends on the kindness of foreign lenders. Any meaningful liquidation of those holding would be a market shock that would drive interest rates higher. So, Scott Bessent is protecting the strained Treasury market with clever currency machinations. The secretary, like the president he serves, must be a stable genius.

And yet…

With virtually his next official breath, Bessent announced a major new initiative to further weaponize the dollar, a program the leading success of which is to drive foreign states further from the dollar. His full tilt intervention explicitly threatens dollar holders around the world, making clear that the dollar is not a neutral and reliable monetary instrument like gold; their dollar holdings are subject to Washington’s policy whims.

“ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences,” wrote President Donald Trump on Truth Social (his bold and caps, not mine).

So, with Washington’s borrowing needs greater than ever, the Treasury keeps threatening foreign dollar holders.   

It is the kind of madness that has driven countries to lighten up on the dollar, grow central bank gold reserves, and develop bilateral and multilateral dollar alternatives.

Many people are accustomed to such discordance in all the state’s behavior. They take its baffling contradictions as a given of governments, the more so the bigger the government.  And ours in this biggest in the world.

For example:

• To this day, Washington still spends millions on tobacco crop subsides, even as it spends additional millions on anti-tobacco programs.

• The U.S. Department of Agriculture encourages people to eat more produce and less sugar while it spends their money on crops that become fats and sugar.

• In his madcap war with Iran, President Trump has pledged that America is ready “to come to the rescue of the Iranian people”; that he is finally giving them “what they want.” Yet who can forget his April social media post saying, “A whole civilization will die tonight, never to be brought back again”? Or “We’re going to bring them back to the Stone Ages, where they belong.”

If there is a thin line between genius and madness, we know which side the powers on the Potomac are on. This is not mere cognitive dissidence. It’s the behavior of schizophrenics who shouldn’t be in charge of anything but the Play-Doh in the asylum rec room.

In the present U.S. dollar/debt crisis, Trump’s Treasury Department began its “Economic D-Day” sanctions on Iran by targeting UAE-based branches of an Egyptian bank, cutting off them off from access to the U.S. dollar and the dollar based global financial system. It followed up targeting a Turkish bank that it alleged facilitated Iranian oil-revenue transfers from China.

Oddly enough, although China is Iran’s biggest oil customer, the same secondary sanctions have not been applied to it.

Nevertheless, China has long seen the handwriting on the U.S. dollar wall. Not so many year ago China was America’s biggest foreign creditor with more than $1.3 trillion in U.S. Treasuries—substantially more than Japan. Today its reported holdings have fallen in half. But that is still $600 billion it could unload.

To repeat, Treasury Secretary Bessent has been trying his hand at suppressing bond yields, while he threatens foreign dollar holders. Break out the Play-Doh, because it hasn’t worked out well. Today, as I write, Bessent said he will double down on his interventions, yet the 10-year and 30-year yields continued to march up and are higher than they were when Bessent first announced his scheme. They are highest they have been at any time since the 2008 Great Financial Crisis.

Bessent’s old mentor, hedgefunder Stanley Druckenmiller, scolded him in a recent Wall Street Journal piece headlined, “LET THE BOND MARKET SPEAK. Rising interest rates are a signal of trouble ahead. Artificially suppressing it heightens the danger.”

“Governments defending prices against fundamentals always lose,” Druckenmiller wrote, noting the real solution for lowering yields is addressing the deficit.

That sensible solution, staunching the gushing red ink, is a non-starter in the overstretched global American military empire.  Because the international reserve dollar and the empire are coextensive, things are about to get rough. Americans seeking to protect their wealth and their families may want to do what overseas dollar holders are doing and look to enduring alternatives like gold.